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HHS has issued proposed regulations that would establish benefit and payment parameters for 2017. The proposed regulations, which also address some Exchange-related items, primarily impact individuals, insurers, state Exchanges, and navigators and brokers providing Exchange support—but some of the proposals apply to employers and advisors. Here are some highlights:

Small Employer Definition. Consistent with the PACE Act (see our article), the proposed regulations revise the definition of small employer to preserve the pre-health care reform insurance cutoff of 50 employees, with an option for states to extend the cutoff to 100 employees. This definition applies for small/large group market delineations and establishes eligibility for the SHOP, which is open only to small employers until 2017 when states can choose to extend SHOP eligibility to large employers.

Risk Stabilization Programs. Health care reform included three programs designed to promote market stability by balancing risk: the transitional reinsurance, temporary risk corridors, and permanent risk adjustment programs. Only the last of these three will be active in 2017, so the focus of these proposed rules is on the standards affecting the permanent risk adjustment program. However, a proposed change to the transitional reinsurance program would authorize HHS to audit TPAs, ASOs, and other third parties that assisted contributing entities (such as self-insured health plans) with calculating or submitting their reinsurance contributions for 2014–2016. Contributing entities remain liable for the payment of reinsurance contributions, but these proposed regulations would require them to ensure the cooperation of their third-party assistants. [EBIA Comment: Records relating to reinsurance contributions must be maintained for at least ten years (see our article). Contracts between service providers and self-insured plan sponsors should be reviewed and possibly amended to address potential reinsurance audits.]

Annual Enrollment. HHS is proposing an annual open enrollment period from November 1, 2016 through January 31, 2017 for Exchange coverage in 2017. This is consistent with the 2016 open enrollment period, although HHS is requesting comments on possible changes for 2018.

Guaranteed Availability/Guaranteed Renewability. Health care reform generally requires insurers to guarantee availability and renewability with certain limited exceptions. Due to a mismatch between the exceptions for guaranteed availability and guaranteed renewability, there are circumstances (e.g., ceasing membership in an association) under which insurers are permitted to decline renewal but then are obligated to issue the same coverage under guaranteed availability. HHS explains that proposed rules would provide consistency by eliminating exceptions to guaranteed renewability that are not also exceptions to guaranteed availability. [EBIA Comment: Although the preamble explains the proposed changes and indicates that amendments will be made to 45 CFR § 147.106, the proposed regulations do not include changes to that regulation. We will be looking for a corrected release of these proposed regulations.]

SHOP. Currently, employers using the federally facilitated SHOP can offer employees either a single plan or a “horizontal” choice of all plans available at a selected actuarial coverage level (e.g., gold, silver, bronze). These proposed regulations offer a third option for 2017 that would allow employers to offer qualified employees a “vertical” choice among all plans available from a single insurer, across all actuarial coverage levels. HHS is also requesting comments on whether additional employee-choice models should be made available. [EBIA Comment: In the preamble, HHS notes that state-based SHOPs already have the flexibility to offer the vertical choice option.]

State Exchange Hybrid. The proposed regulations introduce a new hybrid Exchange model—referred to as a “State-based Exchange on the Federal platform (SBE-FP)”—under which a state Exchange would enter into an agreement to use the eligibility and enrollment platform and information technology infrastructure of the federally facilitated Exchange. [EBIA Comment: This model is an expansion of what some states (e.g., Hawaii, Oregon, Nevada, and New Mexico) are already doing to leverage federal eligibility and enrollment platforms.]

Notice of Employee Enrollment in Subsidized Exchange Coverage. Exchanges are currently required to notify an employer when one of its employees is determined to be eligible for advance payment of premium tax credits (see our article). These proposed regulations would change that requirement so that notice is given only when an employee actually enrolls in this type of subsidized coverage. [EBIA Comment: We think this refinement of the notice to employers is an improvement over the current rule. Employer shared responsibility penalties under Code § 4980H are triggered when a full-time employee enrolls in subsidized coverage through an Exchange, so being notified only that an employee iseligible for subsidized coverage doesn’t provide employers with all the information they need. In either case, the Exchange notice does not establish Code § 4980H liability; only the IRS can assess employer shared responsibility penalties.]

Brokers and Agents. Brokers and agents wanting to assist individuals or employers with Exchange enrollment must register with the Exchange and receive training. These proposed regulations include standards of conduct for brokers and agents, with a focus on consumer protection. In addition to protecting personally identifiable information and not being coercive, misleading, or discriminatory, brokers would have to obtain consent before enrolling individuals or employers in Exchange coverage. HHS is requesting comment on whether applicants should be allowed to complete enrollment on a broker’s or agent’s website without being redirected to an Exchange website, as is currently required.

EBIA Comment: There is plenty of detail in this release for anyone working with Exchanges or providing Navigator support to consumers. Among the many details included are proposed network adequacy standards and projected percentage increases in cost-sharing limits and affordability thresholds. Of interest to insurers is a draft 2017 actuarial value calculator. There are also points of interest for those working with student health insurance plans or individuals who may be eligible for hardship or other exemptions from the individual responsibility mandate. For more information on Exchange-related issues for employers and advisors, see EBIA’s Health Care Reform manual at Sections XX (“Mechanisms to Allocate Risk”), XXI (“Exchanges, Qualified Health Plans (QHPs), and CO-OPs”), XXVIII.G (“Certification of Premium Tax Credit and Employer’s Payment of Penalties”), and XXXVI.I.4 (“Calculation and Collection of Reinsurance Contributions”). See also EBIA’s HIPAA Portability, Privacy & Security manual at Section XVIII (“Guaranteed-Availability and Guaranteed-Renewability Rules for Large Group, Small Group, and Bona Fide Association Plans”).